Medical tests are often the reason why most people put off taking a term plan. In an interaction with Business Line , Aneesh Khanna, Head Marketing & Product Management, IDBI Federal Life Insurance, talks about this and many other points to be kept in mind while taking a term cover. Excerpts:

For how many years should you take a term insurance policy? Is it necessary to continue the cover post-retirement too?

By taking insurance for a large tenure you are making sure that you are covered for a longer period, even post retirement, though the premium will be marginally more. It’s always recommended to buy a term insurance early in life and for the maximum tenure possible. In your early life you are healthier and hence your premium will be the lowest. Taking a 30-years term insurance will be very cost efficient than taking a 15-20 years term insurance and extending it later.

Are medical tests mandatory? In case they are optional, do they affect the claim or premium rates in any way?

Even if medical tests are not mandatory, it’s always better to take a medical test before buying the policy because it will iron out the chances of rejection of a claim. The exemption from medical tests does not mean insurer can sweep the health problems under the carpet. You will still be required to make a declaration about your health condition in the application form and the premium rates will be fixed on the basis of your disclosure. The declaration puts the onus on you to prove that you are in fine health. If you hide a health condition, it can have severe repercussions on your insurance cover and premium rates, as the insurer would calculate risk accordingly.

Should investors ‘step up’ or ‘step down’ the sum assured over the years or should the amount be the same through the policy tenure?

If you already have a life insurance policy with certain amount of sum assured, an increase is required when you marry, purchase a home against a loan or have running personal or business loans or large credit card dues.

How important are riders? Is it necessary to take them, given the increase in premium that would entail?

Riders cover risks that are beyond the scope of the main life insurance policy, resulting in a more comprehensive protection. The most common riders cover critical illness, accidental death or permanent disability. These add-ons step in during situations where the main life insurance policy may not come into play. Buying a rider means paying an extra premium for this supplementary benefit. Normally, this premium is low because relatively little underwriting is required. When a claim for the benefits of a rider is made, it can result in the termination of the rider, while the original policy continues to insure you as usual, hence it is recommended to take a rider keeping your present and future insurance needs in mind.

For those with no liabilities such as home loan EMIs or other financial commitments, is term cover necessary?

While term insurance is suitable for everyone, it is ideal for those who are looking for a low cost life cover. It also works well for an individual who has dependents to look after – parents, siblings or spouse.

By how much do the premium rates change over the tenure of the policy for the same sum assured?

The premium rates will not change, unless you decide to increase the sum assured or add riders to the policy.

>venkatasubramanian.k@thehindu.co.in

Related Topics
comment COMMENT NOW